How To Get on Top of Cash Flow Once and for All
Posted on: 27 October 2021
As a small business owner, you may work long hours, provide great service and have a good reputation. However, it appears that you are still struggling to make ends meet and may frequently run into issues with cash. How could this happen, and what can you do to make life a lot easier?
Cash Flow
In most cases, problems like this are caused by an inadequate cash flow. You may have heard of the term and realise that it is an accounting issue, but are unsure how to manage the situation properly.
Assessing the Problem
To begin with, you need all the information together in one place, and the data must be properly recorded. Most people in your situation would bring in a bookkeeping service at this point as they are very experienced and will be able to monitor your incomings and outgoings on a regular basis.
Subscriptions and Leases
You may also need to be more strategic when it comes to your revenues and bills. Are you spending cash on subscriptions for various services you no longer need? You may have signed up for something ages ago, and as the monthly fee is not significant, you may have just left it to slide. Now is the time to sort those out.
Also, can you renegotiate the terms of any larger monthly or quarterly costs? It's worth the question.
Line of Credit
Talk with your bank manager to see if you can get an overdraft or line of credit sorted out. If they can see that you have regular incomings, they will usually be willing to talk about it. Try not to use the line of credit unless you really need it, and then it will be an insurance policy against a cash flow crunch.
Sell and Lease
Can you lease any of the equipment that you currently own? Can you get a good price for that equipment if you sell it off? If the answer to both of those questions is yes, then you can avoid having cash tied up in an expensive asset.
Prompt Invoicing
Once you have provided products or services to a client, issue an invoice immediately. Don't simply leave it until the end of a period before doing so, as this is money that should be in your bank instead. Again, a good bookkeeper can help you here and will certainly chase any outstanding payments as soon as they become overdue.
Early Payment Discount
You may be able to get customers to pay more promptly if you offer them a deal for doing so. Give them a percentage off for early payment, but make sure that you factor all of this into your costings beforehand.
Getting More Advice
These are just some of the ways that you can manage cash flow more effectively. Once you engage a new bookkeeper, they can probably suggest some additional solutions.
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